In 2012, Wells Fargo agreed to a $175 million settlement with the Justice Department to resolve allegations that its lenders unfairly steered homeowners in Black and Latino communities into subprime mortgages. The company denied any wrongdoing, but former employees described a lending “machine” that saddled people of color in Maryland and several other states with junk loans and higher rates and fees than those offered to white borrowers. The alleged discrimination contributed to a burgeoning housing crisis, causing foreclosure rates in cities such as Baltimore and Memphis to skyrocket, impoverishing families and leaving neighborhoods of color with blighted and abandoned homes. The settlement was one of the largest fair-lending payouts in history and a major victory for Baltimore, one of the first cities to file suit against Wells Fargo.
Fast-forward to late July 2019. Taking a shot at Rep. Elijah Cummings (D-Maryland) for probing his administration, President Trump stoked yet another racial controversy with a tweet calling Black neighborhoods in Cummings’s Baltimore district “very dangerous” and a “disgusting, rat and rodent infested mess.” The tweet sparked widespread outcry over the president’s racism. Housing Secretary Ben Carson, the only Black member of Trump’s cabinet, was dispatched to play damage control with a visit to Baltimore and an appearance on Fox & Friends, one of Trump’s favorite TV shows. Carson, who used to work as a surgeon in Baltimore, generated further controversy by comparing the city to a “cancer patient” and assuming that “young men sitting on porches” must be unemployed — an assumption echoing a racist trope about Black people.
Meanwhile, Carson’s Department of Housing and Urban Development (HUD) advanced a proposal that housing and civil rights groups say would make it difficult if not impossible to file anti-discrimination lawsuits against lenders, insurance companies and landlords — cases like the one that led to a historic settlement against Wells Fargo. Politico obtained a copy of the proposal, a wonky regulatory document detailing changes to federal rules under the Fair Housing Act that is currently circulating in Congress but has received little media attention. However, the proposal provides a glimpse into how — beyond its racist public comments — the Trump administration is quietly working to gut what housing experts say are crucial tools for fighting racial discrimination. Additionally, the proposal appears to codify reactionary notions of “race neutrality” and “color blindness” in the face of still-rampant inequality, according to advocates.
Kristen Clarke, president of the Lawyers’ Committee for Civil Rights Under Law, said Carson is continuing a “broad attack” on civil rights with a proposal that would “eviscerate” the Fair Housing Act’s protections against systemic discrimination.
“The changes that Secretary Carson is proposing are designed to make it virtually impossible for communities of color to prevail in lawsuits challenging the discriminatory effects of unjustified barriers to housing,” Clarke said in a recent statement.
Replacing “Disparate Impact” With “Race Neutral”
At issue is “disparate impact,” a decades-old legal theory holding that discrimination need not be intentional to have an unfair (and possibly illegal) impact on people of color, people with disabilities, women and other groups protected by laws like the Fair Housing Act. For example, a lender could decide not to work with homebuyers who make less than $50,000 a year. Such a policy appears to be race-neutral on its face, but it would have a disparate impact on Black families, which have a lower median income than white families. The Obama administration issued a guidance in 2014 warning administrators that they could run afoul of civil rights law under the disparate impact standard if minority students are punished at disproportionately high rates, even if their disciplinary policies do not mention race.
Right-wing ideologues have railed against disparate impact for years, arguing instead that government policies should be “color blind” and “race neutral.” Along with a long list of administrative civil rights rollbacks, the Trump administration has ordered federal agencies to examine how disparate impact can be removed from the federal rule books. Trump’s education officials have already rescinded the landmark disparate impact guidance on school discipline issued by the Obama administration to contain the school-to-prison pipeline.
Advocates say the principle of disparate impact is not only crucial for winning individual discrimination cases, it’s also an important tool for addressing structural inequality and the nation’s legacy of systemic racism.
Consider Baltimore, where city-enforced segregation and the once-widespread practice of “redlining” still shapes the neighborhoods where Carson complained about “squalor” and men “sitting on porches” today. In the 1930s, decades before Black families in Baltimore were targeted by predatory lenders, the Federal Home Owners’ Loan Corporation carved out Black neighborhoods on maps and told lenders to refuse home loans in those areas — all with the federal government’s blessing. The Fair Housing Act outlawed redlining in 1968, but public divestment and mass displacement of residents by highway projects, the war on drugs, mass incarceration, and later, intense gentrification, would all take a toll on Baltimore’s neighborhoods of color.
Today, only 42 percent of Black families and 30 percent of Latino families in Baltimore own their own homes, compared to 60 percent of whites, according to Prosperity Now, an anti-poverty group. Nationally, the Black home ownership declined by 6 percent from 2000 to 2015, reaching to levels not seen since the Fair Housing Act outlawed race-based discrimination in 1968, according to the Urban Institute. In fact, Melissa Stegman, the senior policy counsel at the Center for Responsible Lending, said the Black homeownership rate may be even lower today than it was in 1968, offering “extraordinary and disturbing” evidence that the disparate impact standard is still needed to combat housing discrimination.
“So-called ‘neutral’ policies and more hidden forms of discrimination are keeping some of this out of the public eye, but it’s no less damaging and families are suffering,” Stegman said in an interview. “We need disparate impact theory in order to root out unjustified policies and practices that are keeping people from being able to lead happy, productive lives, or be able to rent a place, or have home ownership and build family wealth.”
Rooting Out “Hidden” Discrimination
Stegman said the HUD proposal would not take disparate impact off the books completely, but a coalition of civil rights and housing groups agrees that it would make the bar for challenging many “hidden” forms of discrimination incredibly high. Under the Trump administration’s proposal, the current three-step process for filing such claims — which was shaped by 11 federal circuit court rulings and refined by the Obama administration — would be replaced with a five-step process that Stegman says reflects the talking points of creditors, insurance companies and other industry groups, not to mention right-wing think tanks pushing for a “race neutral” government.
Under the Obama-era rules, plaintiffs alleging discrimination must show that a practice or policy can be discriminatory toward a group of people, such as people with disabilities or Black homebuyers in a certain neighborhood. If the defendant can show the policy serves a legitimate business interest — like determining which applicants are eligible for a mortgage restructuring program — then the defendants must show that a less-discriminatory alternative is available. Under the Trump administration’s proposal, defendants would face more hurdles, including proving a “robust causal link” between the policy and the alleged discrimination. They would also have to show that the policy is “artificial, arbitrary, and unnecessary” — legal standards that advocates say will be difficult, if not impossible, to meet.
The Trump administration’s proposal would prevent the vast majority of discrimination cases from even going to court, robbing plaintiffs of a chance at the discovery process that may be necessary to gather evidence showing discrimination in the first place. The administration argues these changes are necessary to bring the rules in line with a recent Supreme Court ruling, which upheld disparate impact claims under the Fair Housing Act but somewhat limited their application. However, Stegman said this justification is “extremely disingenuous,” because the court did not mandate any changes to the Obama-era rules, a position later recognized by lower courts. The proposal also strikes language defining policies that perpetuate racial segregation as discriminatory, Stegman said.
“This proposal is setting out a road map of new excuses that business can use to discriminate … including profit and policy considerations,” Stegman said. “It seems it would justify virtually all policies and practices that a company or a government would put forth.”
In addition to undermining the disparate impact model, there’s plenty of other worrisome language in the Trump administration’s proposal, according to Solomon Greene, a senior fellow at the Urban Institute who worked with HUD under the Obama administration. One clause would create a safe harbor for computer algorithms. Algorithms may not be designed to be discriminatory, but that may reinforce racial biases in practice. Studies have found that algorithms used for mortgage applicants left Black and Latino residents with higher interest rates than whites, despite comparable credit scores.
Greene said that one explanation for this is that data plugged into algorithms can reflect structural inequalities already present in society: People of certain racial and economic backgrounds are more likely to have been denied lines of credit in the past, for example. However, the administration’s proposal essentially discourages companies from collecting data on race and gender that could expose these inequalities — and open the door for anti-discrimination challenges.
“The original rule was drafted to say — and the courts understood — that we do need to pay attention to race, we do need to collect data on race, and we need to guard against discrimination, even when it’s not called discrimination,” Greene said in an interview. “The underlying ethos of the [administration’s proposal] is one of race neutrality, you know, ‘we should not be paying attention to this.’”
Erasing Centuries of Racial Injustice
Green said “race neutrality” flies in the face of the Fair Housing Act itself, which was originally written to address the glaring disparities and legalized racial discrimination that the civil rights movement challenged. Greene and other advocates warn that other HUD policies meant to enforce the Fair Housing Act could soon be on the chopping block under Trump.
“Race has been infused in everything and has been throughout our country’s history — in where housing is built, who gets to live there, who gets loans — and the Fair Housing Act was not drafted to make everything race neutral and race blind,” Greene said. “In fact, it’s very race conscious.”
The new HUD proposal doesn’t reflect the values of the Fair Housing Act; it reflects the administration’s broader view of racism, down to the president himself. When Trump is called a racist for calling urban neighborhoods “filthy,” he vehemently denies it, because, after all, he and his government are “race neutral.” Instead, he says, the problem lies with the Democrats, who run major cities and are willing to call anyone who disagrees with them a racist. Not only does this argument erase centuries of racial injustice that shaped the country we live in today, it distracts from the Trump administration’s on-paper efforts to roll back anti-discrimination protections. It also muddles Trump’s own personal history.
Perhaps the new HUD proposal shouldn’t surprise us. After all, Trump’s own history as a landlord and housing developer in New York City shows rampant instances of racial discrimination, according to a mountain of evidence amassed by the Justice Department in the 1970s. At the time, Trump entered into an agreement with the Nixon administration and promised not to shut out Black renters from his apartment buildings and comply with the Fair Housing Act — the same law his administration is moving to weaken today.